Tuesday
Feb122008

What a Guy

"Hahahahah.  When I fly commercial, that's when you'll know I'm broke!" - Warren Buffett, CNBC - 2/12/08

Monday
Feb112008

Recession Odds Stabilize at 67%

Every month or so, we like to update the Intrade prediction market odds of a recession in 2008.  As shown, after a spike in January, the contract has declined some and stabilized in the 65% to 70% range.  This means the actual money is putting the odds of a recession in '08 at about 67%. 

Recessionodds

Intrade also has contracts for whether or not US GDP growth will be positive in each quarter of 2008.  Based on these contracts, the odds for positive GDP growth are less than 50% for each quarter of '08, meaning investors are currently betting that we could have a recession for at least 4 quarters.

Recessionodds1 

And on a side note, it's funny to see that Intrade has even made contracts for US income tax rates over the next few years.  For those worried or obsessed about higher taxes, why not hedge your bets?

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Monday
Feb112008

This Email Is To Inform You That Your Email Is Not Working.

According to Reuters, Research In Motion (RIMM) sent an email to its clients this afternoon informing them that the Blackberry service was not working due to a "critical severity outage".  So let's get this straight.  Research in Motion (RIMM) is sending emails to clients to tell them that they won't be able to receive emails?

Monday
Feb112008

Market Returns in Euros

A recent commenter asked that we highlight the returns of various global equity markets in Euros as well as in local currencies to give better credence to the decoupling thesis.  As shown, due to the decline of the US dollar, the returns of the S&P 500 since the start of 2004 (as well as the Nikkei 225) look pretty paltry compared to other global indices when measured in Euros.

Euros21108

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Monday
Feb112008

Why Google (GOOG) Was Not Added to the Dow

With the recent announcement of changes to the components of the Dow Jones Industrial Average, several members of the financial media have asked the camera why Google (GOOG) wasn't added.  The reason is simple -- the Dow is a price weighted index.  Therefore, the higher the price of a stock, the greater its weight in the index.  If GOOG was added to the Dow, it would have by far the largest weighting in the index at 26.3%!  The table below shows the hypothetical weightings of each of the Dow thirty components if GOOG were added instead of Bank of America (BAC).  Unless GOOG splits its stock, or they change the way the Dow is calculated, GOOG isn't going to be added anytime soon.

Dow_components

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Monday
Feb112008

Sector Dividend Yields and Changes Since the Market Peaked

Below we highlight the current dividend yields of the S&P 500 and its ten sectors.  We also provide each sector's dividend yield as it stood when the market peaked on October 9th.  The S&P 500 as a whole has declined 15.47% since the peak, and its dividend yield has risen from 1.78% to 2.16%.

As shown, Telecom and Financials have seen their yields rise the most since the peak, but they have also experienced the biggest price declines.  The Utilities sector looks pretty good because its yield has risen from 2.87% to 3.15%, while its price has only declined by 6%.  The Materials sector is the only one that has seen its yield decline. 

Yield211_2

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Monday
Feb112008

Earnings Season Winners and Losers

Every earnings season, there are always stocks that have huge moves after reporting quarterly results.  Stocks that are big winners typically retain their strong upside momentum, while companies that fall sharply have a tough time regaining their footing.  We track the price reactions of all companies in response to their earnings reports, and below we highlight the companies that have had the biggest 1-day gains and losses on the first trading day following the release of their quarterly numbers this earnings season.

As shown in the first table below, INFN is the stock that has had the biggest upside reaction so far.  In response to its report after the close on 1/31, the company went up 44.13%.  MFLX ranks second behind INFN at 37%, followed by NVEC (35%), LCBM (30%) and STAR (28%). 

Besteps_2

On the downside, so far SIRF has been the biggest loser this earnings season.  After reporting earnings after the close on 2/4, the stock went down 54.76% on the following day.  SIRF is followed by ARAY (-36%), FCFS (-34%), VMW (-33.9%) and MERX (-33.7%). 

Worsteps

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Sunday
Feb102008

The Anatomy of a Slowdown

This article in this week's Economist provides a good geographic summary of the current US slowdown.  We especially like the map included with the article (shown below).

Slowdown_3

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Friday
Feb082008

Will Microsoft (MSFT) Raise its Offer for Yahoo! (YHOO)?

There has been a lot of speculation over the last few days that Microsoft (MSFT) will raise its hostile takeover offer for Yahoo! (YHOO).  This is illustrated by the fact that YHOO shares traded at a premium to MSFT's offer yesterday.  However, a look at the largest holders of YHOO suggests that if YHOO is going to get a higher bid for the company, they may not want to rely on MSFT.

The table below lists the twenty largest shareholders of YHOO who also hold stakes in MSFT.  As shown, these investors own nearly a third (29%) of YHOO's outstanding shares for a total value of $11.1 bln.  However, at the same time, their holdings in MSFT are over 5 times that at ($57.9 bln).  Given that the size of their holdings in the acquirer far outweigh the size of their holdings in the target, these holders may be on MSFT's side.

Largest_yhoo_shareholders

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Friday
Feb082008

The Week That Was

Below we provide the titles and thumbnails of the in-depth B.I.G. Tips reports we released this week.  If any spark your interest, they are all available to our Premium subscribers.  These are anticipatory, ahead-of-the-curve research reports that cover markets, economies, stocks, commodities, housing and anything else related to making people money.  And Premium subscribers also receive many more reports as shown on our Products page.

This week's B.I.G. Tips reports: Earnings Triple Plays (stocks that have beaten EPS and revenue estimates and guided higher), It's the Guidance, Stupid (is guidance causing market declines), Top Technicals (some of Bespoke's favorite technical plays), S&P 500 Performance During Recessions (when to expect a bottom), ETF Overbought/Oversold (potential ETF plays), S&P 1500 Dividend Screen (a stock screen based on high yields with expected dividend increases), Are Transports A Leading Indicator? (how the market does when transports outperform), Insider Buying By Sector (where are insiders buying the most), CSCO Earnings (typical price reaction to earnings), At Least There's Tomorrow (market performance following large down days), Housing Futures (what CME's housing futures are predicting for real estate), S&P 500 Decile Performance (what indicators are currently moving stocks), For Comparison's Sake (Nasdaq vs Homebuilders), Is Value a Good Value? (a price to book stock screen).

Tipp1 Tipp2 Tipp3 Tipp4_2 Tipp5 Tipp7 Tipp8 Tipp9 Tipp10 Tipp11 Tipp12 Tipp13 Tipp14

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Friday
Feb082008

Monthly Bloomberg Survey of Economists

Bloomberg released its monthly survey of 65 economists today, and below we highlight the median estimates for a number of economic indicators.  As most would have predicted, economist projections for the US economy got worse since the January survey.

As shown below, the consensus among economists surveyed is for GDP in Q1 '08 to now grow by just 0.50% -- down from 1.10% last month.  The first quarter is forecast to be the worst, however, with growth slowly increasing through the remainder of the year.  By Q4 '08, GDP is expected to be back at +2.50%.  Unfortunately, CPI estimates were raised and consumer spending estimates were lowered as well.

As far as rates are concerned, economists expect the Fed Funds Rate to eventually drop to 2.50% and stay there for the remainder of the year.  It should be noted that economists didn't predict the most recent rate cuts, however, since just last month they expected the Fed Funds Rate to be no lower than 3.50% by the end of 2008.  The Fed Funds Rate is currently at 3.00%.

While these estimates provide a good gauge of the current sentiment of economists, they don't offer much predictive power.

Gdp_3

Cpi_2

Fedfunds_3

10yr_2

Consspen_2    

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Friday
Feb082008

Bespoke on CNBC

Street_signs_4Bespoke's Paul Hickey will appear on CNBC's Street Signs with Erin Burnett today sometime between 2 PM ET and 3 PM ET.

Friday
Feb082008

Two Bearish Covers in a Row

Last week we highlighted Business Week's cover story on the meltdown in housing.  This week's issue follows up with the credit markets.  While the efficacy of the magazine cover indicator as a contrarian signal is up for debate, covers like these (as well as this morning's Wall Street Journal headline) show that no one can accuse the press of being overly bullish on the prospects for the economy.  If things do become as bad as most of the media is predicting, it will be the most widely predicted crash in history.  And remember, these headlines are coming out after many financials and housing stocks have already corrected 50% or more.

Bw_two_weeks_in_a_row

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Friday
Feb082008

Are Inflation Concerns Really Weighing on the Fed's Next Move?

This morning's Wall Street Journal had a story with the headline, "Mounting Inflation Concerns Weigh on the Fed's Next Move."  The article questioned how likely future rate cuts are given the mounting concerns among Fed officials that inflation may accelerate in the second half as the economy rebounds.

While we don't doubt that the Fed is closely monitoring inflation levels, we would argue that it has taken a back seat to the current issues in the credit and financial markets.  Since August, the WSJ has run at least eight headlines (red dots below) questioning whether or not the Fed would continue to cut rates because of inflation concerns, and following each one, the Fed has cut rates.

Fed_funds_rate

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Friday
Feb082008

Technology P/E Ratio Back to Historical Lows

As shown in the historical chart of the S&P 500 Technology sector, its P/E ratio has now moved back to 15-year lows.  With the sector moving lower in price and earnings continuing to show strength this quarter, Tech's P/E ratio has dropped to 21.63.  The sector's P/E was at these same levels in late 1995 and the middle of 2006. 

Techpe

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